Navigating an IRS audit for the first time can be overwhelming. Whether the IRS is auditing you or your business, it can be difficult to make sense of the process on your own without any previous frame of reference. Below we’ve outlined everything you need to know about an IRS audit, from why you’re being audited, what to expect, and how to get legal help.
What is an IRS Audit?
Most IRS audits are triggered by discrepancies on filed tax returns. The IRS also randomly selects a number of tax returns for audit each year. The purpose of an audit is to verify that everything you have reported to the IRS is true and that you have correctly reported the tax owed.
Being selected for an audit does not necessarily mean you have filed incorrectly, just that your filing was flagged as unusual. If you are able to provide documentation that supports the information you reported on your tax return, the matter ends there.
Why Am I Being Audited by the IRS?
An IRS audit can happen for a number of reasons. If you’ve made an error on your tax return, this can trigger an audit. Simple math errors or rounding up numbers can result in your tax return being selected for an audit. You may also be audited if the IRS detects that you are neglecting to report income or you have claimed too many deductions, charitable donations, or losses on a Schedule C.
Occasionally, you may be audited at random by the IRS. The main purpose of these audits is to provide research data, but if the IRS does detect a discrepancy during one of these audits, you may still be liable for paying penalties and interest.
Types of IRS Audits
There are three main types of IRS audits: correspondence, office, and field.
Correspondence
Correspondence audits take place through a series of letters between you and the IRS. First, the IRS will formally state the reason for the audit, and what your next steps are. Usually, your options are to agree with the IRS, or you can contest the audit by providing documents or other records showing that you filed your taxes correctly.
Office
Office audits take place at a local IRS facility and require a meeting with an IRS agent. Generally, these are considered more serious than correspondence audits and may focus on larger errors or issues with your tax filing. If you feel uneasy or nervous about an office audit, consider hiring a tax attorney to act as your representative and guide you through the process.
Field
Field audits take place in your home or place of work. Unlike office audits, the IRS agent comes to your address and performs the audit there. Unlike office audits, field audits aren’t limited to specific items, meaning you may be under more scrutiny. Field audits are considered the most serious and it’s highly recommended that you hire a tax attorney well versed in field audits to give you counsel.
Preventing an IRS Audit
The best way to prevent being audited by the IRS is to file your taxes promptly and accurately every year. The more accurate your taxes, the less likely you’ll be audited. There are exceptions to this where the IRS audits you because something about your return is flagged in their system, but you have the ability to contest the audit.
Keeping good financial and tax records can help prevent IRS audits and provide proof that you have correctly filed your federal income tax return. With good record keeping, it’s easy to find and send whatever documentation the IRS needs to verify your tax submission.
Getting Help with an IRS Audit
It’s never a bad idea to hire a tax attorney to support you during the auditing process, regardless of severity. Licensed tax attorneys can inform you on what to expect for your particular audit and how to handle each step. Additionally, if you intend to contest an IRS audit, an experienced tax attorney will be able to present your case and help you gather the necessary documentation.
Currently Facing an IRS Audit?
Mindy Meigs is ready to represent you. As a former IRS attorney with 15 years of experience, Mindy is equipped to represent individuals, businesses, trusts, and estates in administrative tax audits. Contact us today to schedule your initial consultation with an experienced tax attorney.